EUR 900.00 For Business Accounts Only

GTC - NAV growth already priced in - IPOPEMA

NAV growth already priced in
We re-initiate coverage of Globe Trade Centre (GTC) with a HOLD recommendation and FV of PLN 9.75 per share. As of end 2Q19 the company managed 46 projects with a total GLA of 760k sqm, which generated EUR 142m of in-place rent (+14% y/y) and FFO of EUR 37m in 1H19 (+28% y/y). Given the average occupancy rate of income-generating assets is 94%, we believe that the major upside for the NAV will come from the new developments in the coming quarters. GTC currently has nearly 87k sqm of office area under construction with completion scheduled in 3Q19-1Q21 (the company estimates additional in-place rent of EUR 16.7m). There are also potential disposals (especially the preliminary agreement regarding White House) that might result in higher dividend payments. Based on the development schedule, we forecast a 2018-23 NAV CAGR (adj. with dividend payments) of around 8%. The company trades at its BV and with nearly 10% discount to its EPRA NAV.
NAV to grow at a 2018-23E CAGR of 8% based on development pipeline
As of end-2Q19 GTC operated 46 commercial buildings with a GLA of 760k sqm and had six projects under construction with total GLA of 87k sqm. In 2018 GTC reported revenues of EUR 154m (+20% y/y) and gross profit of EUR 112m (margin of 72%). The average occupancy rate on completed projects reached 94%. We do not expect the project portfolio to significantly improve its performance in the years ahead, however we forecast the company to recognize profit on revaluation of EUR 38m in 2019, EUR 31m in 2020 and EUR 35m in 2021.
We forecast net profit of EUR 93m in 2019 and EUR 96m in 2020
Gross profit grew by 21% y/y in 2018, but we expect the pace of growth to deteriorate to 10% y/y (to EUR 122m) in 2019 (due to scheduled completion of five projects) and 9% y/y in 2020. Given the development projects we expect the FFO to improve to EUR 74m in 2019 and EUR 84m in 2020 with the FFO yield reaching 7.0% and 8.0%, respectively. We expect net profit to reach EUR 93m in 2019 and EUR 96m in 2020, which should allow for a DPS of PLN 0.41 in 2020 and PLN 0.45 in 2021.
P/BV valuation broadly in line with European peers
The company trades at a P/BV of 0.98x in 2019E and 0.94x in 2020E, broadly in line with its European peers. In our forecasts we assume that the company increases its DPS in the years ahead with DPS of PLN 0.41 in 2020 and PLN 0.45 in 2021, implying a DY of 4.4% and 4.8%, respectively. Including dividend payments we expect an NAV CAGR of 8.2% in 2018-23. We set the FV at PLN 9.75/share with a HOLD recommendation. We remind of the strategic options review and potential changes to GTC’s shareholder structure.